Emerging Market Hedge Funds and the Yen Carry Trade

Posted: 20 Feb 2009  

Jarkko Peltomaki

University of Vaasa

Date Written: June 2008

Abstract

For emerging market hedge funds, funding through the yen carry trade provides the possibility of enhancing returns by funding in a low coupon currency. This study examines whether emerging market hedge funds are exposed to the value of the Japanese yen and whether this is the key exposure associated with their use of leverage. The results suggest that the returns of these hedge funds are only weakly exposed to yen exchange rate but the use of leverage is associated with yen exposure, which implicates the importance of the yen carry trade.

Keywords: Emerging markets, Carry trade, Hedge funds

JEL Classification: G10, G19, G23

Suggested Citation

Peltomaki, Jarkko, Emerging Market Hedge Funds and the Yen Carry Trade (June 2008). Emerging Markets Review, Vol. 9, No. 3, 2008. Available at SSRN: https://ssrn.com/abstract=1344659

Jarkko Peltomaki (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa, FI-65101
Finland

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